TurboTax, a California-based tax preparation company owned by Intuit, has agreed to a $141 million settlement to be distributed to customers across the United States. The settlement comes after the company was accused of deceptive advertising practices, specifically in products marketed as free for working-class filers who are legally entitled to file their taxes for free.
While TurboTax denies any wrongdoing, the company is on the hook for more than $100 million in settlement cash, according to the lawsuit.
Here’s what you should know.
The settlement is related to Intuit’s two free TurboTax versions.
If you’ve ever filed taxes in the United States, you’re familiar with TurboTax. What you may not know is that the company provides two free versions of its tax-filing software, one of which was developed in collaboration with the IRS Free File Program.
The partnership program allows lower-income taxpayers, including those earning less than $34,000 per year, as well as members of the military, to file their taxes for free. In exchange, the IRS agreed not to launch its own tax preparation service and compete with Intuit.
TurboTax also provided a Free Edition program, which allowed people with “simple returns” to file using their program for free. According to Fox59 News, one-third of US taxpayers would have qualified for the company’s Free Edition, and 70% would have qualified for TurboTax’s partnership with the IRS Free File Products.
After being accused of deceptive practices, Intuit reached a settlement.
According to Fox59 News, a ProPublica report published in 2019 found that Intuit “used deceptive tactics to steer low-income consumers toward its commercial products and away from federally supported free tax services.”
Intuit was accused of engaging in practices such as allegedly using “confusingly similar” names for free and paid products, allegedly blocking the IRS Free File service landing page from online search results, and allegedly bidding on paid search results that directed customers to use “freemium” software rather than the free versions they were eligible to participate in.
Although Intuit did not admit any wrongdoing, it agreed to a $141 million settlement.
Intuit did not admit any wrongdoing as part of the settlement, but agreed to pay $2.5 million in administrative costs related to the lawsuit, with the remaining funds going to customers. The settlement terms, which were signed by the attorneys general of all 50 states, make more than 4.4 million taxpayers eligible.
Customers who paid for the TurboTax service to file their taxes but would otherwise have been eligible for free services will receive a $30 payment for each year they were affected from 2016 to 2018, according to the settlement. Consumers will automatically receive a direct payment and notices in the mail.